One of them got me thinking:
Not really passive lah. You have done your homework before any dividend can go into your pocket.Having said, why WB's way also work for some people?But not for people like us, i think.
There can be many ways to look at "passive". Each of us have to come to their own conclusion.
Is it passive because most of the work is done by someone else while we share the fruits?
Is it active because I've to do my homework before making my investing decision?
Am I going to do my homework regularly (3 times a week) to ensure my investing decision is sound?
Do we not all make decisions in life by doing some form of homework or another? When we decide which Fixed Deposits/Bond to purchase, do we not find out which is the most suitable deal out there?
I guess you get my drift. Passive may mean differently to different people. But generally, as long as I don't have to actively put in effort on a regular basis to reap returns (like how a trader works tirelessly to hit the jackpot in the stock market), that's passive for me.
Sure I've to do some initial analysis, and later some regular maintenance work, but the bulk of the job is done by someone else (the management of the business). Of course, that's my thinking, and people can disagree.
But why do Warren Buffet way works for some people? Berkshire Hathaway, one of the most successful business in the US doesn't pay a single dime out as dividend.
Yes, the stock value sky-rocketed throughout the decades. The growth is amazing and awe-dropping. I would love to have that type of returns. But it's all paper gains. Gains that cannot pay for my bills, cannot pay for medical expenses, cannot pay for education. Don't get me wrong, I love WB, I even own a small share of BH. But I cherish realised gains more than unrealised ones.
I would akin this amazing growth to our dearest CPF. It's a paper-gain until we draw down the money (or get paid monthly upon draw-down age). What's the use of CPF if we don't get to receive the monthly payments right? Even the CPF returns my capital eventually, I don't prefer holding a pure capital gained stock than one that shares its profit.
I guess we all own stocks with an end in mind. You can choose to hold one that gives no dividend, and liquidated it when you think its enough. Or you choose a dividend stock and live off the income distributed.
One is a fish that grows to adult and get caught for its meat. The other is a cow that keeps producing milk day in day out.
I heard drinking milk is good for growth. I should drink more. But those lactose intolerant should not attempt. Consume what is suitable for your own body.
there are much observation of the business on a recurring basis. if you have 10-20 of that you multiply your effort. while you dont have to think of it every hour, the less you think of it, you might not be putting in enough effort required to monitor it enough. people underestimate the effort required.
ReplyDelete